TOKYO, Sept 14 The Bank of Japan will likely
release next week an analysis showing that lowering government
bond yields of up to 10 years has a bigger positive impact on
the economy than pushing down longer-dated yields, sources
familiar with its thinking said.
The analysis will be part of the BOJ's comprehensive
assessment of its policies scheduled at its Sept. 20-21 rate
review, where sources say it will likely shift its prime policy
target to interest rates from base money.
For the full story on some options the BOJ is considering,
The BOJ shocked markets and the government in January by
adding negative rates to its massive asset-buying programme
launched in 2013. Sources said it may debate next week whether
to cut rates more deeply.
BOJ officials have voiced concern about the risks of Japan's
flattening yield curve. But they also worry that reducing its
purchases of super-long bonds without a clear reason would stoke
market fears it is withdrawing monetary stimulus.
The BOJ hopes to use the analysis to show that pushing down
the short end of the curve has more merits than doing so for the
That would allow it to justify steepening the yield curve by
reducing purchases of super-long bonds and compensating for it
with buying more shorter-term securities.
The central bank may also offer guidance on how much room
there is left to push down real interest rates by comparing them
with what it sees as a desirable yield curve.
The desirable curve would be consisted of Japan's "neutral
interest rates" - or theoretical interest rate levels that
neither overheats or cools the economy, they said.
The guidance would be different from an explicit target or
cap on long-term rates, as the BOJ won't commit to keeping
yields at a certain level with unlimited bond purchases.
(Reporting by Leika Kihara, Sumio Ito and Yoshifumi Takemoto;
Editing by Kim Coghill)